I watch DivX movies via my media PC.
The quality is determined by the compression options and ultimate filesize of the file you're trying to play.
Generally speaking, the larger the DivX file, the better the quality.
I recently watched a 1080p batman begins, and the quality was for all intents and purposes flawless (at least to my uneducated eyes). The filesize was however nigh on 4Gb.
Your average 700Mb DivX movie (deliberately sized to fit on a CD) will have noticeable artefacts and be obviously of poorer quality than a 'proper' DVD.
The other obvious problem with DivX is no multichannel sound...
L